Assets and Liabilities: Key Classifications

Current Assets

• Definition: cash & other assets expected to be converted to cash or used within 1 year or one operating cycle (whichever is longer).
• Cash: currency, coins, checks on hand, bank balances.
• Investments in Trading Securities: short-term, marketable equity investments.
• Notes Receivable: formal promises to receive cash soon.
• Interest Receivable: interest earned on notes, not yet collected.
• Accounts Receivable: customer balances on charge accounts.
• Advances to Employees: cash given, to be repaid through future service.
• Merchandise Inventory: cost of goods held for sale at statement date.
• Accrued Income: earned but uncollected income (e.g., interest before maturity).
• Prepaid Rent: rent paid for future periods.
• Supplies on Hand: consumable items (store/office) on hand.
• Prepaid Insurance: unexpired insurance premiums (always current, even if >1 year).

Noncurrent Assets

• Definition: assets held >1 year, not for sale, provide long-term benefits.
• Land: ground owned; non-depreciable.
• Building: operational structures; depreciable.
• Equipment: machinery, tools; depreciable.
• Furniture & Fixtures: office furnishings; depreciable.
• Accumulated Depreciation: total depreciation recorded on depreciable assets (contra-asset).

Current Liabilities

• Definition: obligations due within 1 year.
• Accounts Payable: unpaid supplier invoices.
• Notes Payable (short-term): written promises to pay within a year.
• Interest Payable: accrued but unpaid interest.
• Deferred/Unearned Income: cash received for future goods/services.
• Taxes Payable: owed but unpaid taxes.
• Accrued Expenses: incurred but unpaid costs (wages, utilities, rent).

Noncurrent Liabilities

• Definition: obligations due after >1 year.
• Notes Payable – Long-Term: written IOUs due in the long term.
• Installment Contracts Payable: debts repaid in periodic installments over time.
• Mortgage Payable: long-term, property-secured loan.
• Bonds Payable: debt securities with periodic interest and later principal repayment.